Hostname: page-component-77c89778f8-cnmwb Total loading time: 0 Render date: 2024-07-23T05:05:03.390Z Has data issue: false hasContentIssue false
  • English
  • Français

The Capital Growth Model: An Empirical Investigation

Published online by Cambridge University Press:  19 October 2009

James L. Bicksler  and
Edward O. Thorp
Get access Rights & Permissions [Opens in a new window]

Extract

Modern micro-capital theory offers three major alternative choice theoretic approaches from which a set of market equilibrium prices can be derived. These approaches are:

1. Time-state preference theory of Arrow [1] and Debreu [6],

2. The capital asset pricing model (hereafter CAPM) of Sharpe [34], Lintner [23], and Fama [7],

3. The capital growth model of Kelly [16], Breiman [5], and Latané [17]

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 2 , March 1973 , pp. 273 - 287
Copyright
Copyright © School of Business Administration, University of Washington 1973

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Arrow, K. J. “The Role of Securities in the Optimal Allocation of Risk Bearing.” Review of Economic Studies, Vol. 31 (April 1964), pp. 91–96.CrossRefGoogle Scholar
[2]Black, F., Jensen, M. C., and Scholes, M.. “The Capital Asset Pricing Model: Some Empirical Tests.” In Studies in the Theory of Capital Markets, edited by Jensen, M. C.. New York, N. Y.: Praeger Press, 1972, pp. 79–121.Google Scholar
[3]Blume, M., and Friend, I.. “Measurement of Portfolio Performance Under Uncertainty.” American Economic Review, September 1970.Google Scholar
[4]Blume, M. “A New Look at the Capital Asset Pricing Model.” Journal of Finance, forthcoming.Google Scholar
[5]Breiman, L. “Investment Policies for Expanding Business in a Long-Run Sense.” Naval Research Logistics Quarterly, December 1960, pp. 647–651.CrossRefGoogle Scholar
[6]Debreu, G.The Theory of Value, New York, N. Y.: John Wiley and Sons, Inc., 1959.Google Scholar
[7]Fama, E. “Risk, Returns, and Equilibrium: Some Clarifying Comments.” Journal of Finance, March 1968, pp. 29–40.CrossRefGoogle Scholar
[8]Fama, E., and MacBeth, J.. “Long-Run Growth in a Short-Run Market.” Unpublished manuscript, August 1972.Google Scholar
[9]Fama, E., and Miller, M. H.. The Theory of Finance. New York, N. Y.: Holt, Reinhart and Winston, 1972.Google Scholar
[10]Friend, I., and Blume, M.. “Risk and the Long-Run Rates of Return on NYSE Common Stock.” Working Paper No. 18–72, Rodney L. White Center for Financial Research, University of Pennsylvania, 1972.Google Scholar
[11]Hadar, J., and Russell, W. R.. “Rules for Ordering Uncertain Prospects.” American Economic Review, January 1969, pp. 25–34.Google Scholar
[12]Hakansson, N. H. “Capital Growth and the Mean-Variance Approach to Portfolio Selection.” Journal of Financial and Quantitative Analysis, January 1971.CrossRefGoogle Scholar
[13]Hakansson, N. H. “Multi-Period Mean-Variance Analysis: Towards a General Theory of Portfolio Choice.” Journal of Finance, September 1971.Google Scholar
[14]Hakansson, N. H., and Liu, Tien-Ching. “Optimal Growth Portfolios when Yields are Serially Correlated.” Review of Economics and Statistics, November 1970, pp. 385–394.CrossRefGoogle Scholar
[15]Hanoch, G., and Levy, H.. “The Efficiency Analysis of Choices Involving Risk.” Review of Economic Studies, 1969, pp. 335–346.CrossRefGoogle Scholar
[16]Kelly, J. “A New Interpretation of Information Rate.” Bell System Technical Journal, August 1956.CrossRefGoogle Scholar
[17]Latané, H. “Criteria for Choice Among Risky Ventures.” Journal of Political Economy, April 1959.CrossRefGoogle Scholar
[18]Latané, H., and Tuttle, D.. “Criteria for Portfolio Building.” Journal of Finance, September 1967.CrossRefGoogle Scholar
[19]Latané, H.Security Analysis and Portfolio Management. New York, N. Y.: Ronald Press, 1970.Google Scholar
[20]Latané, H., and Young, W.. “Test of Portfolio Building Rules.” Journal of Finance, September 1969.CrossRefGoogle Scholar
[21]Leland, H. E. Dynamic Portfolio Theory, Ph.D. dissertation, Harvard University, 1968.Google Scholar
[22]Levy, H., and Paroush, J.. “Multi-Period Stochastic Dominance.” Unpublished paper, Israel, June 1972.Google Scholar
[23]Lintner, J. “Security Prices, Risk, and Maximal Gains from Diversification.” Journal of Finance, March 1968, pp. 29–40.Google Scholar
[24]Litzenberger, R., and Budd, A.. “A Mote on Geometric Mean Portfolio Selection and the Market Price of Equities.” Journal of Financial and Quantitative Analysis, December 1971, pp. 1277–1282.CrossRefGoogle Scholar
[25]Markowitz, H. “Investment for the Long Run.” Working Paper No. 20–72, Rodney L. White Center for Financial Research, 1972.Google Scholar
[26]Markowitz, H.Portfolio Selection: Efficient Diversification of Investments. New York, N. Y.: John Wiley and Sons, Inc., 1959.Google Scholar
[27]Merton, R. “An Intertemporal Capital Asset Pricing Model.” Working Paper 588–72, Alfred P. Sloan School of Management, M.I.T., February 1972.Google Scholar
[28]Mossin, J. “Optimal Multiperiod Portfolio Policies.” Journal of Business, April 1968.CrossRefGoogle Scholar
[29]Quirk, J. P., and Saposnik, R.. “Admissibility and Measurable Utility Functions.” Review of Economic Studies, 1962, pp. 140–146.CrossRefGoogle Scholar
[30]Ricks, B., and Rubinstein, M.. “Portfolio Theory in Perspective.” Unpublished manuscript, n.d.Google Scholar
[31]Roll, R. “Evidence on the Growth Optimal Model.” Unpublished manuscript, April 1972.Google Scholar
[32]Samuelson, P. A. “Lifetime Portfolio Selection by Dynamic Programming.” Review of Economics and Statistics, May 1969.CrossRefGoogle Scholar
[33]Samuelson, P. A. “The ‘Fallacy’ of Maximizing the Geometric Mean in Long Sequences of Investing or Gambling.” Proceedings National Academy of Sciences, vol. 68, No. 10, October 1971, pp. 2493–2496.CrossRefGoogle ScholarPubMed
[34]Sharpe, W. F. “Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk.” Journal of Finance, vol. 19 (September 1964), pp. 425–442.Google Scholar
[35]Smith, K. V. “A Transition Model for Portfolio Revision.” Journal of Business, September 1967, pp. 425–439.Google Scholar
[36]Stiglitz, J. “Optimality of Stock Market Allocation.” Quarterly Journal of Economics, February 1972, pp. 25–60.CrossRefGoogle Scholar
[37]Thorp, E. “Portfolio Choice and the Kelly Criterion.” Business and Economics Statistics Proceedings, American Statistical Association, 1971, pp. 215–224.Google Scholar
[38]Thorp, E., and Whitley, R.. “Concave Utilities are Distinguished by Their Optimal Strategies.” Unpublished manuscript, 1972.Google Scholar
[39]Tobin, J. “Liquidity Preference as Behavior Towards Risk.” Review of Economic Studies, vol. 25 (February 1958), pp. 65–86.CrossRefGoogle Scholar